THE BLOG
02/20/2013 06:06 pm ET | Updated Apr 22, 2013

The Uncertain Future of Safety Net Hospitals

She was a young African American woman. Having grown up in one of Boston's most violent neighborhoods, she had not finished high school and had difficulty holding a steady job. Given her financial situation, buying health insurance was out of the question. When she developed a cough, she had refrained from seeking care for four days - until finally, her symptoms worsened to the point where she took the hour-long bus ride into the center of town. This was the only hospital she could afford without health insurance, she said.

This story is similar to the many that I encountered while volunteering at Boston Medical Center (BMC). One look at the patient population, and it is clear that healthcare in the United States is biased towards the wealthy. While insured Americans can pick and choose from a variety of physicians and hospitals, the 49 million who are uninsured are often turned away from everywhere but the emergency room and hospitals like BMC, so-called "safety net hospitals".

Safety net hospitals provide essential health services for their community's most vulnerable citizens - the poor, the uninsured, and the recently immigrated, to name a few - and are one of the only remaining healthcare options for these populations. Although they comprise only two percent of hospitals nationwide, these hospitals provide 19 percent of hospital-based uncompensated care. In 2010, theyprovided $128 billion in services, with 50 percent directed towards low-income patients. Unfortunately, many safety net hospitals are financially embattled. To continue providing care to those who cannot afford it, they rely on payments from the government, known as disproportionate share hospital (DSH) payments, to partially offset costs. For example, in 2010, DSH payments provided 4 of the estimated 8.4 billion dollars in uncompensated care costs incurred by safety net hospitals nationwide. Even so, many of these hospitals operate on razor-thin margins, where the slightest tip in the wrong direction could send them plummeting over the edge into bankruptcy.

Now, safety net hospitals are facing an impending budget crisis that threatens their very existence -ironically precipitated by the Affordable Care Act (ACA). The ACA has planned DSH payment reductions of up to 75 percent beginning in 2013. Originally, these reductions were to be offset by a mandate that all states expand their Medicaid eligibility to cover an estimated 16 million additional Americans. These newly insured Americans could then seek care at a number of other hospitals, thereby reducing the patient burden on safety net hospitals. However, in an unexpected turn of events, the Supreme Court ruled that Medicaid expansion for states must be optional instead of mandatory. Already, governors of fifteen states, including Rick Perry of Texas, Bobby Jindal of Louisiana, and Rick Scott of Florida, have indicated that they do not plan to expand their Medicaid programs. This means that safety net hospitals in these states may find themselves with drastically reduced DSH payments and just as many uninsured patients to treat, endangering their financial viability.

What can be done to ensure the future of safety net hospitals in this country? Two possible solutions include pressuring Congress to partially repeal the planned DSH cuts, or advocating for all states to accept the Medicaid expansions under the ACA. However, due to the current political climate, both of these measures appear unlikely.

One promising avenue is to encourage safety net hospitals to change their healthcare delivery systems to eliminate waste and improve efficiency. A notable example of this approach was adopted by BMC, which recently used $100 million to restructure its delivery system and shift from fee-for-service to pay-for-performance. Through emphasizing screening and preventative care, transforming IT, and implementing quality improvement programs, BMC has significantly improved both its budget and its patient experience. If other safety net hospitals can follow BMC's lead - perhaps through capital funding from programs such as the Health Care Innovation Challenge, which awards up to $1 billion to fund new models of care delivery - then they too may be able to deliver better care to their patients while improving their bottom lines. Ultimately, the ACA is a big step forward for improving access to health care, but it is important to make sure that essential healthcare institutions, such as safety net hospitals, do not get left behind.

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